Ch. 5

The Excel sheet included will help to solve the question below.

2. Assume that OfficeMart places orders more frequently, but everything else remains the same. On your worksheet increase the number of orders from 4 to 9. (Prior to completing this requirement, change all worksheet figures back to their original amounts.)

(a) What is the customer margin under activity-based costing when the number of orders increases to 9? (Enter a loss as a negative amount.)

(b) What is the product margin under the traditional costing system when the number of orders increases to 9? (Enter a loss as a negative amount.)

(c) Which of the following statements are true?

You may select more than one answer.

Circle all that apply 1

If a customer orders more frequently, but orders the same total number of units over the course of a year, the customer margin under activity based costing will decrease.

If a customer orders more frequently, but orders the same total number of units over the course of a year, the product margin under a traditional costing system will decrease.

If a customer orders more frequently, but orders the same total number of units over the course of a year, the customer margin under activity based costing will be unaffected.

If a customer orders more frequently, but orders the same total number of units over the course of a year, the product margin under a traditional costing system will be unaffected.

3. OfficeMart has found an error in its data. The percentage of selling and administrative overhead attributable to processing orders should be changed to 30% from 45% and the percentage attributable to supporting customers should be changed to 40% from 25%.

(a) Based on new number of orders in Requirement 2, what is the customer margin under activity-based costing when the data are corrected? (Enter a loss as a negative amount.)

(b) Based on new number of orders in Requirement 2, what is the product margin under the traditional costing system when the data are corrected? (Enter a loss as a negative amount.)

(c) Which of the following statements are true about what happens when the percentage of selling and administrative overhead attributable to processing orders declines and the percentage of selling and administrative overhead attributable to supporting customers increases by the same amount?

(You may select more than one answer.

Circle all that apply

When the percentage of selling and administrative overhead attributable to processing orders declines and the percentage of selling and administrative overhead attributable to supporting customers increases by the same amount, costs are shifted from the processing orders cost pool to the supporting customers cost pool.

When the percentage of selling and administrative overhead attributable to processing orders declines and the percentage of selling and administrative overhead attributable to supporting customers increases by the same amount, costs will be shifted from customers who order more frequently to those who order less frequently.

When the percentage of selling and administrative overhead attributable to processing orders declines and the percentage of selling and administrative overhead attributable to supporting customers increases by the same amount, the customer margins of those who order more frequently will increase relative to the customer margins of those who order less

Undo Clipboard 24:A Chapter 5: Applying Excel Data ManufacturingoverheadSellingandadministrativeoverhead$500,000$300,000 \begin{tabular}{l|c|c|c|c|} \hline & Assembling & Processing & Supporting \\ & Units & Orders & Customers & Other \\ \hline Manufacturing overhead & 50% & 35% & 5% & 10% \\ \hline Selling and administrative overhead & 10% & 45% & 25% & 20% \\ \hline Total activity & 1,000 & 250 & 100 \\ \hline & units & orders & customers \\ \hline \end{tabular} OfficeMart orders: Enter a formula into each of the cells marked with a ? below Review Problem: Activity-Based Costing Perform the first stage allocations Compute the activity rates Chapter 5 Form Determine the customer margin for the OfficeMart orders under Activity-Based Costing Sales